points lower than the 50. 5 percent reported in June. For the first seven months of

2013, inventories of raw materials have
registered in a well-managed range from
a high of 51. 5 in February to a low of

46. 5 in April. An Inventories Index greater
than 42. 7 percent, over time, is generally
consistent with expansion. “The dip in the
Inventories Index is a natural consequence
of the strong production number, using up
inventories and also working off some of
the backlog of orders,” explains Holcomb.

ISM’s Backlog of Orders Index registered

45 percent in July, which is 1.5 percentage
points lower than the 46. 5 percent reported in June. This is the third consecutive
month of contracting order backlogs.

Exports, Imports, and Prices

ISM’s New Export Orders Index registered

53. 5 percent in July, which is 1 percentage point lower than June. This month’s
reading represents the eighth consecutive
month of growth in new export orders,
and follows six consecutive months of
contraction.

“The increase in imports reflects favor-able pricing of raw materials from over-seas,” says Holcomb. “The slight decline inexports really doesn’t mean a lot. It’s stillreally healthy and has been positive foreight consecutive months now — just at alittle slower rate this month. Overall be-tween the two, it shows a healthy globaleconomy with products and raw materialsflowing back and forth.”The ISM Prices Index registered 49percent in July, which is a decrease of 3. 5percentage points compared to the Junereading of 52. 5 percent. This indicates thatraw materials prices decreased in July, asthey did in May.

“The Prices Index number is kind ofindifferent right now,” says Holcomb. “Inthe short term, it’s good news and allowsmanufacturers to buy inventories at lowerprices. Sustaining it at a level below 50 fora long term speaks to broader demand be-ing soft, which we don’t want. We’ll lookforward to it increasing above 50.”

Overall Results

The responses from participants in the ISM
report are, generally speaking, along the
lines of steady to continued demand with
slightly improving conditions. The numbers are strong, but the comments reflect
some healthy reservation.

“I don’t think people should get overly
optimistic by just this one month of data,”
explains Holcomb. “I would expect it to
come down just a little bit, but certainly
remain in the solid, low to mid 50s territory. This, perhaps, is to some degree a
reflection of pent-up demand from earlier
in the year, as well as anticipating a good
second half of the year.”

As the chair of the Institute for Supply
Management Manufacturing Business Survey Committee, Bradley J. Holcomb writes
the monthly Manufacturing ISM Report on
Business. The report is released on the first
business day of each month, and features
the PMI Index as its key measure. For more
information on the Institute of Supply
Management, visit www.ism.ws.